U.S. shale gas will displace a growing portion of the world's expanding energy demand, cutting into the need for oil products from refineries, BP Plc's (NYSE: BP) head of refining economics said on Sept. 30.
NGL from the U.S. shale boom such as ethane, an alternative to naphtha refined from crude, could feed as much as a third of demand growth in 2017, BP's Richard de Caux told the Platts Refining Summit in Brussels.
Refined oil products already in storage will further undercut refinery profits, he said.
"We expect a substantial chunk of the incremental demand growth next year to be met by two sources which don't come from a refinery," de Caux said, citing NGL and oil products in storage.
This week, the first U.S. ethane cargo arrived at a chemicals plant in Scotland, and de Caux said the vessel was a harbinger of supply to come that would undercut profit support for refineries running crude oil, whose margins boomed over the past two years of cheap crude and stellar demand growth.
"That's coming out of oil demand," de Caux said of petrochemicals coming from ethane, rather than from refined naphtha, in petrochemical units.
BP expects demand growth of 1.2 million barrels per day (MMbbl/d) to 1.4 MMbbl/d in 2017, of which 300,000 bbl/d to 400,000 bbl/d could come from NGL. This is up from around 200,000 bbl/d from as a larger overall demand growth in recent years, de Caux said.
Other consumption growth would be fed by inventories of oil products, which in the developed world stood nearly 150 MMbbl above the five-year average in 2016, "close to full," de Caux said.
This is likely to limit refinery margins and runs, putting pressure to close on the continent's refineries, along with ageing units in Japan and possibly on the U.S. Atlantic Coast—areas where demand growth is stagnating.
"The cheap oil prices did not save Europe from further rationalizations," he said.
Recommended Reading
Venture Global Gets FERC Nod to Process Gas for LNG
2024-04-23 - Venture Global’s massive export terminal will change natural gas flows across the Gulf of Mexico but its Plaquemines LNG export terminal may still be years away from delivering LNG to long-term customers.
US EPA Expected to Drop Hydrogen from Power Plant Rule, Sources Say
2024-04-22 - The move reflects skepticism within the U.S. government that the technology will develop quickly enough to become a significant tool to decarbonize the electricity industry.
Exclusive: ‘Regulatory Tsunami’ a Top Priority for American Producers, Says AXPC’s Bradbury
2024-04-22 - Regulatory considerations have significant implications for how oil and gas companies evaluate risk, and it’s a top priority for American energy producers right now, said American Exploration & Production Council CEO Anne Bradbury at CERAWeek by S&P Global.
Biden Administration Criticized for Limits to Arctic Oil, Gas Drilling
2024-04-19 - The Bureau of Land Management is limiting new oil and gas leasing in the Arctic and also shut down a road proposal for industrial mining purposes.
Exclusive: The Politics, Realities and Benefits of Natural Gas
2024-04-19 - Replacing just 5% of coal-fired power plants with U.S. LNG — even at average methane and greenhouse-gas emissions intensity — could reduce energy sector emissions by 30% globally, says Chris Treanor, PAGE Coalition executive director.